If there is one thing that everyone has suffered from in the wake of this pandemic, it is frustration. The frustration that comes with not leading a normal life as we knew it, the frustration that comes with government restrictions, and the frustration that has comfortably sipped its way into how we do business. It is, therefore, no surprise that commercial agreements have faced the same frustrating fate, noting the government restrictions imposed by various countries and the usual fears that have made contractual dealings difficult.
Following the previous articles by MMW Advocates LLP on Force Majeure, the dominant question has been, what relief do parties without the Force Majeure Clause have? This article addresses the relief of the doctrine of Frustration, which is an alternative concept to the Force Majeure Clause.
ARE YOU CONTRACTUALLY TRAPPED IN THE ABSENCE OF A FORCE MAJEURE CLAUSE?
No. Where a contract has become impossible to perform, a party to such a contract can rely on the doctrine of frustration as a relief option. Unlike the force majeure clause, the doctrine of frustration does not need to be explicitly provided for in the contract.
WHEN CAN YOU USE FRUSTRATION AS A SHIELD IN YOUR CONTRACTUAL DEALINGS?
Frustration operates to discharge parties from performing their contractual obligation when supervening or unforeseen events make it physically or commercially impossible to fulfill them. For the doctrine of frustration to apply, the supervening event must be at no fault of either of the parties to the contract;
The contractual obligation must be incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which parties had initially contemplated.
WHAT IF THE PANDEMIC MAKES IT HARD TO FULFIL CONTRACTUAL OBLIGATIONS?
Frustration of a contract does not apply because there is hardship, inconvenience, or material loss in fulfilling contractual obligations. For instance, just because transporting cargo has been made difficult though not banned, and efficiency may be affected, does not mean that a courier company can altogether forfeit their contractual obligations due to reduced revenue or inefficiencies occasioned by the pandemic’s consequences.
DOES THIS PANDEMIC QUALIFY AS FRUSTRATING TO CONTRACTS?
The pandemic is in our view, likely to fit within the definition of an event that frustrates contracts for the following reasons
The last comparable event was the Spanish Flu epidemic of 1918 and it is apparent that this pandemic that is currently ravishing the world was unforeseen and seeing how the world is responding to the pandemic, it is apparent that the probability of such an event being foreseen as ever happening again was remotely low.
Therefore, it can plausibly be argued that a pandemic of the type that is currently underway was not contemplated by any parties entering into contracts.
N/B-THIS ARTICLE IS INTENDED AS GENERAL INFORMATION AND NOT LEGAL ADVICE FOR THE SITUATION OF ANY PARTICULAR READER. PLEASE FEEL FREE TO REACH OUT TO MMW ADVOCATES LLP FOR A MORE DETAILED OPINION ON THE IMPACT OF CORONA VIRUS ON COMMERCIAL CONTRACTS.